Wall Street is in love with financial technology plays and Facebook is the newest entrant in the space to keep an eye on, CNBC’s Jim Cramer said Tuesday.
“Ever since Facebook rolled out the concept of Libra in a really boring white paper, it’s become the big cap stock to beat in this market. On good days it soars. On bad days it’s unchanged,” the “Mad Money” host said. “Welcome to the world of fin-tech Facebook. You don’t have to like it, but you shouldn’t let hating Facebook get in the way of owning its stock.”
The social media giant, however, faces regulatory and data scrutiny in Washington, D.C. in its plan to launch its own cryptocurrency. Facebook’s reputation has taken blows, Cramer noted, for its privacy practices along with its inability to eradicate misinformation spread on its platform.
“Fortunately, this made-up currency is cordoned off from the rest of Facebook and backed by a consortium of 27 partners including Facebook, but I think it’s helping to change the entire narrative for this ne’er-do-well business,” he said. “Imagine if Facebook can get a piece of the payments space, it would be huge — and it will be.”
While Libra will be operated as a separate entity by the nonprofit Switzerland-based Libra Association when it launches in 2020, it can be exchanged on Facebook’s messaging service. That can potentially connect the Libra coin to billions of people across the world, Cramer said.
“For the legislators who’re worried about Facebook misusing your data, the idea that they’re going to muscle their way into the payments processing [space] it might be alarming,” he said. “But if you care about the earnings per share, that sounds like a pretty good story, especially in a market that can’t get enough fintech.”
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People run with Nunez del Cuvillo’s fighting bulls during the eighth day of the San Fermin Running of the Bulls festival in Pamplona, Spain.
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Cramer shot down the idea that there is too much bullish sentiment on Wall Street.
While the technology sector, which is fueling those concerns, has some sky-high valuations, the “Mad Money” host said the whole market does not fit the mold. The major averages each rallied more than 0.20% during the session, with the S&P 500 closed at a new all-time high of 2,973.
“After a big run, you always hear that there are just too many bulls, too much excitement, too much optimism, that we’ve been lulled into a false sense of security,” he said. “As far as I’m concerned, there’s too much exuberance in one particular subset of expensive tech stocks, but other than that, you’re boxing with phantoms.”
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Mapping the S&P 500 and Apple
Tim Cook, CEO of Apple laughs while Lana Del Rey (with iPad) takes a photo during a launch event at the Brooklyn Academy of Music on October 30, 2018 in New York City.
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The market may face some rough waters later this week, but the S&P 500 could be poised to surge more than 11% from current levels, Cramer said.
The S&P finished the session above 2,973, another all-time high close.
“The charts, as interpreted by Carolyn Boroden, suggest that both Apple and the broader S&P 500 have more room to run, but the next few sessions might get a little dicey, ” the host said. “When the averages started pulling back in early May, Boroden told us she expected more pain, even though she was still long-term bullish. She nailed it. “
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Winning over Huawei
Visitors pass in front of the Huawei’s stand on the first day of the Mobile World Congress in Barcelonaon on February 27, 2017 in Barcelona.
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Semiconductor companies will benefit from the Trump administration’s relaxing of sanctions on Huawei, but telecom equipment suppliers are still in the penalty box, Cramer said.
The host said he only expects a partial rollback on the blacklist that President Donald Trump issued on the Chinese telecommunications giant last month. The White House wants American companies to get ahead of Huawei in the race to roll out 5G infrastructure, the fifth generation of wireless technology.
“If you make plain vanilla tech that’s used for handsets, just for your phone … I’m betting you’re good to go,” he said. “But if you’re making components for telco infrastructure, I think you got a pretty big problem.”
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Cramer’s lightning round: Why PepsiCo is a buy
In Cramer’s lightning round, the “Mad Money” host zooms through his thoughts about callers’ stock picks of the day.
Grocery Outlet Holding: “I need to do more work. Why? Because I’ve never visited one. Red-hot IPO that I haven’t been able to visit makes me ill-informed and I will not opine.”
PepsiCo: “Well I’ve got to tell you [CEO] Ramon Laguarta, who is always welcome on this show, has taken the baton from ingenuity and advanced it even further. Faster growth rate, move it up. I like the numbers. Bingo. PepsiCo goes higher.”
Disclosure: Cramer’s charitable trust owns shares of Facebook.